Western Doubts on Soviet Reform Stall Aid Effort

INTERNATIONAL donors, meeting over the next two weeks to respond to desperate Soviet pleas for help, are looking for a ready and reliable set of partners on the receiving end.But a coherent Soviet leadership - with a mix of central government officials and representatives from the breakaway republics - is as tall an order in this disintegrating union as are the huge sums of foreign aid being sought from the West. A host of United States, European, and Japanese officials are now visiting Moscow to assess Soviet need and explore ways of distributing foreign assistance. They are seeking evidence of Soviet commitment to economic reforms before they dole out even a portion of the tens of billions of dollars in requested aid. But central and local leaders here are having difficulty cooperating, much less reaching an agreement, and the jurisdiction between the republics and the union remains undefined. Soviet President Mikhail Gorbachev had indicated optimistically that the republican leaders and central authorities could sign an economic agreement by this Thursday. But many republics, citing conflicting national interests, have been reluctant to coordinate policies covering debt, currency, trade, banking, and customs. Mr. Gorbachev has amended his earlier expectation, saying over the weekend that an economic agreement will be signed by mid-October. Observers doubt that even that date can be met. Kirghizia and Armenia have so far withheld their support, and the Ukraine has reserved its participation in an all-union economic treaty until its Dec. 2 presidential election is held. Even the relative economic powerhouse, Russia, is at odds with the Economic Management Committee of the State Council charged with managing the planned inter-republic economy. Committee chairman Ivan Silayev, whose resignation as prime minister of the Russian Republic took effect Friday, is accused by former Russian colleagues of trying to work out an economic agreement that would in effect undermine Russian sovereignty. While the Soviets are mired in domestic squabbles, US Treasury Secretary Nicholas Brady is pushing for an early meeting of the Group of Seven to coordinate international policy toward the Soviet Union. The G-7 - economic policy makers from the world's richest countries, including the US, Britain, Canada, France, Germany, Italy, and Japan - will meet in advance of the annual meeting of the World Bank and the International Monetary Fund scheduled later this month in Bangkok. High on the G-7 agenda is the mammoth $70 billion Soviet debt, which the cash-strapped Soviets are increasingly unable to pay. US and European officials say that in the coming six months, the Soviets need more than $5 billion to service their debt and pay for essential imports. Soviet prospects for reaping foreign exchange through exports to pay for imports remain dim. Soviet oil, the biggest dollar earner, is needed domestically. Oil production has slipped dramatically this year because of mismanagement, technical problems, and poor equipment. A leading world producer, the Soviet Union may become a net oil importer, if conditions continue to deteriorate. At issue for international creditors examining ways to bridge this financing gap and to delay or forgive Soviet debt payments, is just who on the Soviet side will assume financial responsibility. Meanwhile, World Bank President Lewis Preston has dispatched a team to Moscow to explore means to extend technical assistance. The bank's first step will be to set up a $30 million trust fund, which will be augmented by other public and private lending institutions. Asked when the bank will have an agreement with the Soviets, Mr. Preston responded, "We have sent people on the spot, but there is no [Soviet] authority to sign." He expects an agreement to be finalized over the next three months. In the next few days, the IMF is expected to give the Soviets special associate status to provide the Soviets with IMF advice. Full IMF membership remains elusive, says a top Fund official, as long as the Soviets cannot muster agreement over basic leadership. European officials are perplexed by recent Soviet requests for aid. Mr. Silayev has stunned the European Community with a request for over $14 billion in emergency food assistance over the next six months. Just a week earlier, the Committee's deputy visited Brussels and issued a request for $7 billion in aid. EC Commissioner Jacques Delors puts Soviet food needs at roughly $4 billion. Soviet officials say they now expect the EC to supply just $7 billion of the total requested. European officials are wary of Soviet requests. Last winter central and local authorities manipulated $250 million in EC aid, but apparently only part of it reached its intended destination, and months late. Republic leaders have cautioned that any Western-supplied aid must go to new leadership and not through the old, familiar channels. The West, in turn, is asking whether new systems are adequate to accept and direct the aid. Norbert Walter, chief economist of Germany's Deutsche Bank, perhaps the strongest commercial banking presence in the Soviet Union, says "for the time being, [commercial] funds won't flow." Mr. Walter, who has visited the country several times since the coup, says, "It's more and more difficult to meet people who consider themselves in charge." Germany has been the largest single source of Soviet assistance. Existing German outlays could total $30 billion if a Soviet default on German trade debts and other commercial transactions turns into a government guaranteed gift from Bonn. "We will not do anything more beyond our duty as an EC and G-7 member," says Elmar Brok, a German member of the European Parliament who chaired the parliament's German unification committee and now sits on the social and foreign affairs committees. "We are financially exhausted," he says, referring to Germany's enormous bill for German unification. On the Soviet request for billions of dollars, Deustche Bank's Mr. Walter says, "All those numbers are made up to argue for more help. I just throw them out. They're all absolutely crazy numbers. The discussion with the Soviets is anything but over; nobody accepts those numbers as a basis for discussion."